Rising fuel costs ground United’s growth plans

By Julie Johnsson
Posted March 7 at 6:56 p.m.

With fuel costs soaring, the parent company of United Airlines said Monday that it is curtailing growth plans for 2011 and cutting its domestic flying more deeply than it had planned.

United Continental Holdings Inc. said that its system-wide capacity would remain flat for the year, and that it would curb capacity by offering fewer flights on some routes, exiting less-profitable routes and postponing the start of some new flights, such as planned service from Newark, N.J., to Cairo  slated to launch this spring.

Chicago-based United is the third major domestic carrier to put the brakes on growth for 2011 as jet fuel prices hit the stratosphere. American Airlines and Delta Air Lines Inc. have also said they are tightening controls on capacity.

Airlines, like other transportation industries, have been squeezed as crude oil prices have spiked in recent weeks due to unrest in the Middle East.

But carriers are also facing near-record refinery costs for jet fuel as aging U.S. refineries have reduced capacity this year. Jet fuel traded at $128.2 per barrel the week of Feb. 25, up 50 percent from a year earlier, according to the most recent measure of fuel prices by the International Air Transport Association.

Airlines have responded by raising ticket prices and slapping large fuel surcharges on longer flights. Passengers to Paris and most other European cities pay an added $400 round-trip fuel bill in addition to their base air fare, according to BestFares.com.

But carriers can’t count on passing along all of their increased fuel cost to passengers. Given the uncertain environment, U.S. airlines are again looking to trim unprofitable flying and ground gas-guzzling planes.

Before the fuel spike, United had planned to boost its international flying by 4.5 percent to 5.5 percent this year, while trimming domestic capacity by 0.5 percent to 1.5 percent.

The new plan, unveiled Monday, is for United to increase overseas capacity by 2.5 percent to 3.5 percent and slash domestic flying by 1.5 percent to 2.5 percent.

United said it is also studying dropping fuel-inefficient aircraft from its fleet. In the 2008 fuel crisis, United grounded 94 older-model Boeing 737s and six Boeing 747-400 jumbo jets, the deepest cuts of any U.S. carrier.

The carrier hasn’t decided which aircraft it would remove from its combined fleet of more than 700 United and Continental planes resulting from the 2010 merger of the two carriers. “We’re still analyzing aircraft across the combined fleet,” said Michael Trevino, a United spokesman.

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  1. Steve March 8 at 4:23 pm

    United needs to bring back some of it’s 47’s, fix them up, and then try and get back into market’s where other carrier’s are flying wide-bodies and have taken United’s revenue away from them because they are giving their Customer’s thing’s that UA can’t.

  2. Bill March 9 at 6:26 pm

    Continental’s biggest mistake was merging with the most dysfunctional airline in the world, namely United. Putting their moth-balled 47’s back into service isn’t going to help them. They can’t compete on any front: Flight crews, maintenance, cabin service, passenger service, and most of all leadership. I’ll give them less than a 50% chance of surviving. If Smisek was smart he’d run for the hills and give the pig back to Tilton, who did nothing but take from what was once a great carrier. If you’re smart, you’d dump your UAL stock now!